Back Library Contents
Profitable Sublimating
Last month's article dealt with losing money because of "dollar dumping." In a nutshell, this occurs when an unfavorable pricing strategy is developed only because of a perceived technical or production ability.
This month, the sneaky twin cousin, "dollar swapping," will be discussed. The word "sneaky" is deliberately used because a retailer can be losing net profit and not realize it.
Dollar Swapping
Dollar swapping is a normal facet of the retail awards and gift trade. A customer comes into your shop to make a purchase. Last year they bought item "A" and to be different this year, they buy item "B". Like most customers, they really don't want to spend any more money this year than last, so the "B" they pick has a sticker price similar to last year's "A" item.
So far, so good. If you raised your prices enough to at least cover inflation, you probably did no worse than at least make the same profit margin as you did last year. That didn't put you ahead of the game but at least you didn't fall behind.
The above statement is only true, however, if your customer bought the same (or higher) profit class of item as last year. Remember we are not talking about them spending twice as much (that would be wonderful). We are examining what happens if they spend close to the same amount, both years.
Here is what we mean by profit class. Almost every merchandise retailer (especially award companies) uses some type of formula to calculate prices. While the formula is usually consistent for a type of product (trophies, for example) it also usually changes for a different class of product (plaques, for example).
Depending upon pricing strategies, the different methods used to calculate classes of retail prices can cause drastic differences in net profit. This is normal and most retailers keep a balance of this fact in their mind as they suggest options to their customer.
Where this balance most often goes awry, however, is when the established retailer offers several totally new classes of products. This happens quite often with the introduction of sublimation (usually full color) into a shop.
Now, in addition to printing full color on white plaque plates, the company can do full color imprints on mouse pads, cups, dry erase boards, license plates, ball caps, T-shirts, key chains and many other items.
This can be very profitable: if you stay totally on top of your class margins and watch your selling methods, to make sure you are not unfavorably swapping dollars.
Class based profit margins can be demonstrated, by using your own products as an example. Pick out a sublimated plaque, trophy and a gift class product (T-shirt, coffee cup, etc.), that you sell, that has the same sticker price. Calculate the actual profit you make from each. They will be different, and sometimes drastically different.
If your customer really wants a lower profit margin class of item, that's no problem. The reason you have a wide selection is to fulfill different needs and desires. Just don't be the one to suggest lower margin items, without suggesting higher margin items, first.
Why might you do that? Simple, human nature. We all have a tendency to be excited and talk enthusiastically about the new things we can do. Put a new product in the showroom, have a customer point to it and, it's off to the races, on our commentary.
The upside to this is that enthusiasm sells. The downside is that doesn't always work in our favor. The following story is from an awards dealer we recently talked to.
A dealer, new to full color sublimation, proudly told us that he had sold about 80 full color sublimated coffee cups, as trophies for winners in a 10k charity run. This was instead of the single color sublimated plaques he had sold them the year before.
This made us curious so we asked if the cups were getting to be a popular replacement for plaques. His response was "Well, actually they were going to get the plaques until I pointed the cups out and showed them how beautiful they were. They loved them."
We were sure they did. His enthusiasm was obviously very contagious. Thinking about profit, we asked if they spent more on the cups than on the previous year's plaques. His reply was "No, they spent about the same."
This is a classic example of unprofitable "dollar swapping." I can't think of any area of the country where a dealer could make more profit by selling cup, rather than a plaque.
Does that mean you should not sell full color sublimated gift items? Certainly not! Just make sure how you do it, also more profitably benefits you.
What if the dealer had sold his customers the plaques they originally wanted (before his enthusiasm changed their minds), wrote up the order, got approval and then introduced his cups, for an additional sales opportunity.
What if he had suggested them as a memento for his customer's staff, or as a special "thank you," to important volunteers or even as a fund raiser, the day of the event?
Granted, he might not have made the sale. However, he certainly wouldn't have made less profit than last year. He most certainly would have given himself a chance to make more, this year.
In Conclusion
It can be very profitable to add a new class of items to your product mix with your sublimation abilities. It won't be as profitable, however, if you just swap dollars.
To maximize opportunity, think in terms of how sublimation could help made additional sales. Consider how it could help bring in new customers. Uniqueness does help sell, but make it "more" or "in addition to," rather than "in place of."
Profitably growing benefits you and your customer. If nothing else, you will still be there next year and they will appreciate that.